M/S. Paharpur Cooling Towers Limited vs Dalmia Cement (Bharat) Limited

M/s. Paharpur Cooling Towers Limited Appellant

Vs.

Dalmia Cement (Bharat) Limited Respondent

Present: For Appellant:- Mr. Murari, Senior Advocate with Mr. Raj Jhabakh and Mr. Anandh. K, Advocates.

For Respondent:- Mr. Goutham Shivshankar, Mr. Avinash Krishnan and Mr. Prashant, Advocates.

ORDER

31.08.2017- On 8th August, 2017, notice was issued and the following

observations were made by this Appellate Tribunal: -

'The question arises whether the Tribunal ought to

have allowed the appellant to start the insolvency and

bankruptcy proceeding without giving notice under Section

8 of the Insolvency and Bankruptcy Code, 2016 (I&B Code

for short), followed by Rule 4(3) of the Insolvency and

Bankruptcy (Application to (Adjudicating Authority) Rules,

2016, before going through the question whether the bank

statement as per Section 9(3),(b) & (c) of the I& B Code has

been complied with or not?

Shri Gautam Shivshankar, Advocate accepts notice

on behalf of the respondent. No further notice need be -2-

issued on it. The respondent is allowed a week's time to

file reply. Rejoinder, if any, be filed within a week thereof.

Post the matter on 31st August 2017."

2. We have noticed that the Central Government issued Notification

No. G.S.R. 1119(E) dated 7th December, 2016 exercising powers conferred

under sub-sections (1) and (2) of Section 434 of the Companies Act, 2013

read with sub-section (1) of Section 239 of the Insolvency and Bankruptcy

Code, 2016 framed the Companies (Transfer of Pending Proceedings)

Rules, 2016. Rule 5 therein reads as follows: -

"5. Transfer of pending proceedings of Winding up on

the ground of inability to pay debts. - (1) All petitions

relating to winding up under clause (e) of section 433

of the Act on the ground of inability to pay its debts

pending before a High Court, and where the petition

has not been served on the respondent as required

under rule 26 of the Companies (Court) Rules, 1959

shall be transferred to the Bench of the Tribunal

established under sub-section (4) of section 419 of the

Act, exercising territorial jurisdiction and such

petitions shall be treated as applications under

sections 7, 8 or 9 of the Code, as the case may be, and

dealt with in accordance with Part H of the Code: -3-

Provided that the petitioner shall submit all

information, other than information forming part of the

records transferred in accordance with Rule 7,

required for admission of the petition under sections 7,

8 or 9 of the Code, as the case may be, including

details of the proposed insolvency professional to the

Tribunal within sixty days from date of this

notification, failing which the petition shall abate.

(2) All cases where opinion has been forwarded by

Board for Industrial and Financial Reconstruction, for

winding up of a company to a High Court and where

no appeal is pending, the proceedings for winding up

initiated under the Act, pursuant to section 20 of the

Sick Industrial Companies (Special Provisions) Act,

1985 shall continue to be dealt with by such High

Court in accordance with the provisions of the Act."

3. The aforesaid notification was doubted by this Appellate Tribunal as

we were of the view that Central Government while exercising powers

conferred under sub-sections (1) and (2) of Section 434 of the Companies

Act, 2013 has no jurisdiction to frame Rules with respect to transferred

cases under Rule 239 of the Insolvency and Bankruptcy Code, 2016. This

was also pointed out to the Central Government. -4-

4. This was also noticed by Appellate Tribunal in the case of "Unimark

Remedies Ltd. Vs. Ashok Alco Chem Ltd. in Company Appeal (AT) (Insol.)

N6.45 of 2017" disposed of on 21st July, 2017. The Central Government thereafter came out with the notification dated 28th February, 2017, under

the same provision as referred to earlier and framed the Companies

(Transfer of Pending Proceedings) Amended Rules, 2017, therein in place

of 'sixty days' time, the time was extended to 'six months' from the date of

transfer. Rule 2 of amended Rules 2017 reads as follows: -

"2. In the Companies (Transfer of Pending Proceedings)

Rules, 2016, in rule 5, in sub-rule (1) in the proviso for the

words "sixty days" the words "six months" shall be

substituted."

5. In that view of the matter, the matter should have been transferred

within the time allowed to act in view of said Rules which was extended by

'six months'. However, suddenly the Central Government issued a

Notification No. GSR 732(E) dated 29th June, 2017, whereby in exercise of

the powers conferred under sub-sections (1) and (2) of Section 434 of the

Companies Act, 2013 read with sub-section (1) of Section 239 of the

Insolvency and Bankruptcy Code, 2016 amended the Rule known as The

Companies (Transfer of Pending Proceedings) Second Amendment Rules,

2017 wherein Rule 5 was substituted and time was granted only till 15th

July, 2017.

"5. Transfer of pending proceedings of Winding up

on the ground of inability to pay debts.-- (1) All -5-

petitions relating to winding up of a company under

clause (e) of section 433 of the Act on the ground of

inability to pay its debts pending before a High Court,

and, where the petition has not been served on the

respondent under rule 26 of the Companies (Court)

Rules, 1959 shall be transferred to the Bench of the

Tribunal established under sub-section (4) of section

419 of the Companies Act, 2013 exercising territorial

jurisdiction to be dealt with in accordance with Part Ii

of the Code:

Provided that the petitioner shall submit all

information, other than information forming pan Of the

records transferred in accordance with rule 7, required

for admission of the petition under sections 7, 8 or 9 of

the Code, as the case may be, including details of the

proposed insolvency professional to the Tribunal upto

15th day of July, 2017, failing which the petition shall

stand abated:

Provided further that any party or parties to the

petitions shall, after the 15th day of July, 2017, be

eligible to file fresh applications under sections 7 or 8

or 9 of the Code, as the case may be, in accordance

with the provisions of the Code:

7 6-

Provided also that where a petition relating to

winding up of a company is not transferred to the

Tribunal under this rule and remains in the High Court

and where there is another petition under clause (e) of

section 433 of the Act for winding up against the same

company pending as on 15th December, 2016, such

other petition shall not be transferred to the Tribunal,

even if the petition has not been served on the

respondent."

6. Ld. Counsel for the appellant submits that the appellant was entitled

to act in terms of the First Amended Rules published by notification dated

28th February 2017 i.e. in six months, before issuance of the subsequent

Second Amended Rule by notification dated 29th June, 2017. Before last

date of completion on 15th July, 2017, the impugned order was passed on

6th July, 2017 rejecting the transfer application on the ground that steps

have not been taken in terms of Rule 5.

7. We have heard Ld. Counsel for the appellant and Ld. Counsel for the

respondent. The aforesaid fact has not been denied.

8. Ld. Counsel for the respondent submits that before treating the

petition under section 9, the respondent should have given notice under

section 8 of the Insolvency and Bankruptcy Code, 2016.

9. Taking into consideration the totality of the case, while we accept

the stand taken by Ld. Counsel for the appellant that it should have been -7-

allowed time till 151h July, 2017 to take steps in terms of Second Amended

Rules published on 29th June, 2017 i.e. prior to the impugned order, but

setting aside of the impugned order will be of no avail as no further time

can be granted to the appellant to act in terms of Rules aforesaid which is

not in force after 15th July, 2017.

10. In the circumstances, in terms of Second proviso to Second

Amendment Rule 5, the appellant is allowed to file a fresh application

under Section 7 or Section 9 of the Insolvency and Bankruptcy Code, 2016,

as the case may be, in accordance with the provision of the I & B Code. It

is for the appellant is to decide whether it comes within the meaning of

'Financial Creditor' or 'Operational Creditor'. If the appellant feels that if

the company is an 'Operational Creditor' then before filing application

under section 9, it will provide notice under section 8 to the Corporate

Debtor' and follow all conditions of the Insolvency and Bankruptcy Code

and Rules framed thereunder.

11. In such case, the application cannot be decided on the ground of

limitation taking into consideration that the appellant originally preferred

a petition under section 433(e) of the Companies Act, 1956, for the purpose

of counting delay and laches.

12. It will also be open to the respondent to raise all the objections at

the stage of giving reply to Section 8 notice or at the time of admission of

the application.

-8-

13. The appeal stands disposed of with aforesaid observations and

directions. However; in the facts and circumstances, there shall be no

order as to cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Balvinder Singh) Member(Technical) ar